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It’s been widely reported that various luxury brand owners have brought legal proceedings in the USA against Alibaba, the Chinese online shopping giant that recently listed on the New York Stock Exchange. The claim is that Alibaba has knowingly made it possible for companies to sell counterfeit products on its platform. The reports suggest that it’s possible to buy “Gucci bags” on Alibaba for between US$2 and US$5 (as long as you’re prepared to buy in bulk, 2000 or more please!), which is quite cheap if you consider that original Gucci bags apparently retail for some US$795. It’s also said that “Gucci watches” can be had for anything between US$10 and US$80 – once again, vast quantities need to be bought, at least 300, and anything up to 200 000, per month. But an interesting proposition nonetheless, if you consider that the real thing sells for some US$960.

There’s no way of knowing how this will play out. Alibaba believes that the complaint has no basis, and recently indicated that it has a “zero tolerance policy" towards counterfeits. Reports suggest that the company has spent some US$160-million in 2013 and 2014 – and employs more than 2000 people – to tackle the counterfeit goods issue. The company apparently uses data mining technology to track suspicious behaviour and run checks. It’s reported that the company works closely with Chinese law enforcement agencies, and that this co-operation has led to the arrest of some 400 suspects from 18 different counterfeit rings, and shut down over 20 stores and factories. The company also apparently works closely with brand owners, which may explain its public response to the legal proceedings brought by Kering SA, the holding company of a number of luxury brands: “Unfortunately Kering Group has chosen the path of wasteful litigation instead of the path of constructive co-operation.”

Alibaba is not the only online retailer that has had to react to the counterfeiting scourge. eBay, for example, has its Verified Rights Owner Programme (VeRO). How this works is that a company that feels that its intellectual property rights have been infringed sends a letter called a “Notice of Claimed Infringement” to eBay, which, if it thinks that the complaint is valid, sends a “Violation Notice” to the alleged infringer, informing it that the listing has been removed. This system came up recently in a UK court case, Cassie Creations v Simon Blackmore and Mirrorkool Ltd. The person who received the Violation Notice denied that there was an infringement and argued that the Notice of Claimed Infringement was an unjustified threat that entitled it to bring legal proceedings. Mr Blackmore and Mirrorkool Ltd, in response, applied to strike out the case. The court, at the interim hearing, held that the letter might well be an unjustified threat, and said that the matter should go to trial.

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Footnotes: Robyn Muller IP associate [email protected] +27 82 310 0848